Tips To Choose SME Loan Tenure

Looking to expand your small or medium-sized enterprise (SME) and how to apply SME loan? One of the key aspects you need to consider is choosing the right tenure for your SME loan. Determining the suitable loan tenure can ensure smooth repayment and avoid any financial strain on your business.

In this article, we will guide you in choosing the right SME loan tenure, how to apply SME loan, and the type of loan you need. You will get practical tips and insights to help you make an informed decision on procuring a low SME business loan interest rate.

Determining your cash flow requirements

Before applying for an SME loan, it is crucial to assess your cash flow requirements. Adequate funds should be available when your monthly payment is due to avoid any financial strain on your business. 

Considering your current and future financial position

Your current and future financial position plays a crucial role in determining the tenure of your SME loan. If you are just starting your business and your short-term cash flow is uncertain, a longer tenure might provide you with more time to repay the loan.

However, in an unpredictable market situation, committing to a long-term tenure may seem daunting. In such cases, starting with a shorter tenure can be a good option. It allows you to evaluate the market conditions and reassess your financial position before opting for a longer tenure

The type of loan you need

Lenders offer various types of SME loans, such as term loans, working capital loans, overdrafts, and cash credit. The type of loan you choose will determine the suitable tenure for repayment.

For instance, working capital loans are generally short-term loans with a repayment tenure of up to 12 months. On the other hand, term loans come with longer tenures ranging from 12 months to 60 months. If you require funds for immediate cash flow needs, a short-term loan might be more appropriate. However, if you need substantial funds for business expansion or upgrading technology, a longer tenure can provide flexibility in repayment.

Now that we have explored the factors to consider when choosing an SME loan tenure let's take a look at some popular SME loan schemes available in India.

SME loan schemes in India

1. Pradhan Mantri Mudra Yojna:

This scheme offers collateral-free MSME loans with affordable interest rates for repayment tenures of 3-5 years. If you are looking for a low SME business loan interest rate, this is perfect.

2. MSME business loan in 59 minutes: 

As part of the Atmanirbhar Bharat Campaign, MSMEs can receive instant loan approvals for amounts ranging from Rs.1 lakh to Rs.5 crores.

3. Stand-up India: 

This scheme extends SME loans to SC/ST categories and women entrepreneurs engaged in manufacturing, trading, or service sectors.

Conclusion

Choosing the right SME loan tenure is crucial to ensure smooth repayment and avoid any financial strain on your business. By accurately assessing your cash flow requirements, considering your current and future financial position, and understanding the type of loan you need, you can make an informed decision.At Mahindra Finance, we understand the importance of adequate capital for the smooth functioning and growth of your small business. We offer collateral-free loans with attractive SME loan interest rates flexible loan tenures. Contact us today for reliable SME loans with flexible tenures and competitive SME loan interest rate to support your business growth. Apply for an SME loan today and take a step towards expanding your enterprise.

FAQs

Q: How can I calculate the SME loan interest rate?

A: The SME loan interest rate is determined by the lender based on factors such as your creditworthiness, business profile, and prevailing market conditions. To get an estimate of your potential interest, you can use SME loan EMI calculator to understand the loan amount, tenure & interest rate.

Q: How can I apply for an SME loan?

A: Applying for an SME business loan is a simple process. You can visit the lender's website or branch office to fill out the application form. Make sure you have all the necessary documents, such as proof of identity, address proof, income proof, and bank statements.

Q: Can I choose a short-term SME business loan if my business has just started?

A: Yes, opting for a short-term SME business loan can be suitable if your business has just started and you are unsure about its short-term cash flow.